From Bankrupt to $8M EBITDA: How Tim Murphy Revived Boomer Parks with PE Discipline

Bruce EckfeldtWelcome, everyone. This is From Angel to Exit. I'm Bruce Eckfeldt, I'm your host. Our guest today is Tim Murphy. He was CEO of Boomers Parks. We're going to hear the story. There's a lot of interesting backstory there: his experience with M&A and doing deals, really understanding the complexities and some of the challenges that come up, how to navigate those things, and the lessons he's learned around selling companies. So with all that, Tim, welcome to the program.

Tim MurphyHey, thanks for having me, Bruce.

Bruce EckfeldtIt's a pleasure to have you on. Before we get into the actual story of Boomers and what you went through there, I'd love to get a little backstory. How did you get into business? What was your professional background? Give us the story.

Tim MurphyGrowing up in an entrepreneurial family, you always had to work. I've been working since I was eight. My parents started with a miniature golf, arcade, and restaurant business in New Jersey. They sold that off, came down to Orlando, and I started working for Disney for six and a half years. Then I got into the restaurant industry for 30 years, with about 150 brands and 10,000 locations.

Then a buddy of mine said, "Hey, I need some help. A friend of mine has an entertainment company," which was trampoline parks. So I got back into that, found value in that company, and helped them sell it. Eventually, private equity asked me to come down to South America. I'm on the board of directors down there with those folks, and we're about to sell that asset this year, family entertainment centers and parks.

Then Cerberus reached out and said, "Hey, we're about to repossess a fund from the Carlyle Group. Would you take a look at what we have in North America?" That's where Boomers Parks came from. It was called Apex Parks Group originally, 16 parks, and we kept eight. I helped select which ones they kept. We took over during the bankruptcy with a stalking horse bid, and it was during the pandemic, opening and closing my parks four times. It was a crazy year in 2020, but then we were off to the races to really make some money. A bankrupt company losing $10 million, and we eventually got to $8 million in EBITDA and sold at a six multiple last year to the Bowlero Corporation.

Bruce EckfeldtA lot of pieces there. It sounds like you've been in business since you were eight. What has your evolution been as a leader, going from operating businesses to really thinking about underlying value and assets and looking at transactions? How have you shifted and evolved as a leader through some of these things?

Tim MurphyI think over time you start looking at what the value in a company is and where it comes from. Let me give you a little example, and then I'll get into Boomers in a moment. When I was at Rebounderz Trampoline Parks, I came in, and it was a franchisor of trampoline parks. There are many in the United States, many brands, many chains. And you start looking at it and realize the value really isn't in the franchisor. We owned patents, and we had an enforceable patent. So there was value in these patents, with 85 claims on trampoline parks. Why don't we do something with this? And we had to get a win, because without a win we had nothing to go after.

So I sued a small private equity firm first, and then said, "Okay, now I can go out and sue the biggest ones out there, because they're all using my patent." Eventually that gave value to the company, and ultimately we sold the company. But the value wasn't in the franchisor.

When you look at Boomers, when we took over, one of the things we needed to do was change these parks completely. The previous company had them for four years. Many private equity firms had owned them along the way, and Cerberus had lent money to them and said, "Okay, defer the risk, here's some money, blah, blah, blah, we're behind you on this." Then eventually they realized they had to take these back, and asked, do we want to take them back or don't we?

They asked me, as a consultant, to come in and first take a look at what they had. "Tell us what you see in all 16 parks." And I said, "You've got a diamond in the rough. It's just been rubbed the wrong way." Obviously there's management and a lot of other things to it, but the parks weren't taken care of. There was four years of deferred maintenance. They hadn't put any money back into these parks. Horrible bathrooms, kitchens, restaurants, arcades, attractions. How about we put a little bit into it, and also focus on our guests?

The previous company was focused on the wrong demographic, and I said, that's not who's coming through the parks. I've been through all your parks. Let's start giving them the services they need: the food and beverages, liquor, beer and wine, the different things an adult crowd would look for, versus the younger crowd they'd been working for. Coming from trampoline parks, that's definitely a young crowd, so I understand that group. But you're also not getting corporate events in, team-building events, groups. The other side of it is that if you focus on these things, you'll get them to come in. And that's ultimately what we were able to do.

When you're looking at your investment, what's driving the revenue? Having been a CFO many times before, I'm looking at the numbers. If anything, I'm comparing the parks to each other, not knowing this particular business yet. What do the P&Ls look like? What's popping out as problems? Repairs and maintenance too low in certain areas, too high in others? We actually found out people were stealing in one particular case. So you start looking at it, and there's a scenario that says we can do better. What does the industry look like? What do our competitors look like? How are they pricing? Can we do something different?

You're looking at multiple things and saying, "Okay, there's a reasonable hypothesis here about what we can do with this. If we change to an older demographic and create a better experience, we might actually sell tickets online. We've got to improve the reviews." They were in the low twos and threes, and we got them to the high scores. But the point is, it's all little steps to get you toward that higher opportunity, which we ultimately sold at a six multiple of earnings, when it had been a bankrupt company losing $10 million.

There were lots of steps along the way. There were a lot of things we looked at and said, "No, we're not going to do that," or "That's too costly." I'm working for private equity. They don't want you to spend money if you can help it. But you start going through this process.

One of the things I did on day one was set the core values. What did I believe in? What did we need to change to? Who did we need to become? We needed honesty, integrity, transparency. My team members needed to know what was going on. They had been left in the dark for four years. So let's tell them truly what's good and what's bad. Beyond that, I needed accountable people, responsible people, innovative risk-taking, profitable sales growth. These were all core values, along with safety and guest experience, and we focused on those core values.

I've said this before, and it's how I've always done things as a CFO: the squeaky wheel gets the grease. So let's focus on what you can control. I can't control third parties. I can't control the pandemic.

Bruce EckfeldtYou can't control the weather.

Tim MurphyExactly. These are the things I can control, so let's focus on those, and let's teach the team what that means. If you keep it all to yourself, nothing's going to happen. Nothing's going to change. You've got to get everyone to believe that the core values are what we live by, and what we hire and fire by. And then it finally does happen. But it takes the person who's leading it to constantly beat their chest, talk about it all the time, and walk their talk, and then eventually the team members start following along: the corporate folks, the park managers, the rest of the park. That doesn't mean I just said it and forgot it. I had to keep doing this every time I went out and saw a park. That's how you start seeing the changes to get to where you need to be.

For me, I always start with the P&L. What's wrong here? What's really glaring? It's great to look at a P&L, which is what my predecessor did at the previous company that went bankrupt, but he never went out to his parks. I went to my parks all the time to visit, sit, talk to the guests, talk to the team members, just to see what was going on. Do I see things that are wrong? Boy, that opened my eyes. There were so many things that were wrong. From team members to guest experience: they weren't taking care of the bathrooms, they weren't taking care of the kitchens, they weren't following standards, there were no SOPs anywhere. But you start enforcing this, and now you have a well-oiled machine that eventually says, "Hey, there's value in this." Someone's willing to pay for that value, and lo and behold, we had a strategic buyer come in and buy us.

Bruce EckfeldtI work with a lot of founder-CEOs who founded these businesses, developed them, and grew them, but they're so enmeshed in them that they have a hard time taking a step back and seeing what value they're really creating. Where's not only the growth opportunity, but the enterprise value opportunity? Ultimately, why is someone going to buy this, and how are we going to create value in a transaction? When you come in, whether it's looking at the P&L or visiting the parks, what do you do that a founder could learn from, in terms of how to objectively look at your business, find the real value creation opportunity, and figure out what you probably need to let go of to scale a business from a value point of view, not just a growth point of view?

Tim MurphyThat's a good question. I think you really have to take a step back and look at the macro level: where you are in the industry. In the case of the parks, I didn't know what my competition was in California. I didn't live in California. I had to get out there, look at the competition, and see who was doing things really well. You can first review the competition by site, and then by the reviews they're getting. What's their experience like? You'll also know where the problems are when you physically go in.

In my case, when I looked at the competition, there were price issues and service issues. Bad service was a given everywhere you went. It just wasn't there. You could tell the team members at the competitors were not focused on the guest, who's paying the bill coming in, and what they're coming in for. And the ones that did really well spent more time with the guest.

I found the same thing with Boomers. I looked at what we were doing with our guests. I was a guest, because I was a consultant first. I was just showing up at parks, and I was seeing no eye contact from managers or team members. No one was talking to me. I walked past one of the managers in one of the parks playing cards with two of the team members, sitting at a picnic table outside. He doesn't care that I'm walking past. I'm a paying guest. He doesn't even say, "Hey, how are you doing? Have a great day." Nothing. They were in their own little world. That says a lot to the guest: there's no one really watching this place. They're doing whatever they want. And I did find out that corporate never came in and checked on them, so why would they change?

So view it yourself. What does it feel like? In our case, it's guest experience, so I always wanted to act like a guest when I came into the parks. If I've gone to my competition, I've seen the best and the worst. And when I looked at our parks, wow, there was a lot of worst all over the place. There were signs everywhere that said this needs to change.

Eventually you get to the point where you teach team members eye contact. I actually put my team through the Disney Institute's guest service program, so they could understand the difference between really good service and bad service, and how Disney does what it does, and get it into their mindset. I said, "We're going to be Disney-like, but at a fraction of the cost." So my team members started to understand a little bit about this.

But one of the things you look at is what the competition is doing. What's going on at the macro level? What can I price this at? Can I go higher than where we are? A lot of people get so afraid: "I can't take the price up." I bet you can. I bet you can. But I also believe that if you're not going to change your service and your experience, then yes, you probably can't take your price up.

Bruce EckfeldtLet me dig in on that one, because I find this a lot. People are so scared of raising prices, because essentially the argument is, "We're going to lose volume. We're going to lose customers." And I say, okay, let's do the calculations. If we increase prices by 20% and lose 10% of our customers, we're actually increasing our profit, even though we're decreasing our revenue. What's your process when you look at price elasticity? Do you have any techniques for looking at price versus volume and profit that help you understand what the best pricing really is?

Tim MurphyI look at it just the way you explained it. Now, that doesn't mean it's the first thing you do. But I will say, when I got there, I did start taking prices up immediately. And people said, "You can't do that." Yes, we can. I needed to fire the discounter who was coming in. In my world of retail-ish, I talk about the Walmart shopper. I don't want to be the Walmart discount leader. I want the Target shopper: a little more educated, looking for a better experience, willing to pay a little more because of that experience. I needed to move away from discounting.

That doesn't mean I could do it on day one. I had season passes. They were giving things away for free, and I'm paying for labor and paying for the costs going into the business. So we had to get away from that. I said, "We need to be profitable on every guest. What does it take to be profitable? Do we even know what our break-even is with labor and food costs and everything else that goes into this?" We didn't. No one could give me a clear explanation.

So I said, the first thing we're going to do is take price up and start moving in that direction. "By the way, guys, your competition is actually charging a little more than you are, so don't tell me you can't do it." So you know there's opportunity there. But we also needed to change the experience, to go after that Target shopper, that better-educated shopper, and that means a lot of things we had to change. How do we train people? I go back to my restaurant days, when we had lineups before people went out on the floor. We'd talk about specials, who's coming in, parties, whatever it might be, just to make them aware of what was going on, not just show up, put an apron on, and go. That's unfortunately the mentality of our industry, family entertainment, unlike Disney or Universal. They do it right.

In the family entertainment space, with over 10,000 locations, there are a lot of places you can go, but who's going to give you the best experience? How do we get that across, start taking price up, and move in the right direction? We had to start cleaning and fixing these buildings. We needed to do things that hadn't been done before. We repainted all the buildings. We spent about $14 million across all eight parks to get them where they should be. At the end of the day, it created more value and a better experience.

So for an owner looking at this and asking what they can do: first, go look at your competition. And you can always push a little further if you have a better experience and a better service. That's where the mentality of the people working there comes in.

When I took over these parks, 16 separate parks, I kept eight, so I knew who I was going to keep and not keep. Some of that was logistical, but it was also: this is where value can be created, this is where we can go with it. And frankly, I can charge more, because you're in my four walls. You're probably not going to run down the street to a fast food place or a fast casual place. So how do I create better food so you don't do that? That's part of F&B, food and beverage: working on that side of it and trying to get better quality products and meals in there.

We created a better experience for the guests through the interaction we had with them. All these little pieces. We could do those things, but you've got to stay behind it. You can't give up. You can't take your foot off the accelerator. You have to keep pushing and pushing to get there. You will get to a better experience, you will get better guests, and they will pay more. You have to have the belief.

I've had so many people come to me on the consulting side and ask, "What's the low-hanging fruit I can do?" There's plenty. And I always just say, "Take price up." "I can't take price up." Yes, because you're not going to do the other things you need to do. You're not going to fix the place. You're not going to deliver better service. You're not going to teach your team members. You're just looking for a quick answer, a silver bullet, and there is none. There were thousands of things we did to turn these parks around.

And each place is a little different. How do we tie into our demographic? We need to understand that, because I had eight separate parks in eight different areas: Northern California, Southern California, Florida, the Panhandle, New Jersey. Different demographics coming to all of them. So how do we present to those different demographics? Every one is handled a little differently, because those are your guests coming into the facilities.

It's the same with your own business. Who's coming in, who's buying, and where can I sharpen the pencil on the numbers as well as the experience? What can I do to create a better experience? Is it better service you're giving somebody? Because people will pay if they feel valued. If they don't feel valued, they're just a number.

I think of it like fast food. You go from one to the next to the next, and they're relatively the same. If one really stands out with a better experience, you're apt to go back more often. In my industry, family entertainment, people only show up 1.6 to 1.8 times a year. Twice a year, that's it. Can I get you to three, four, five times if I create a better experience? I might do different events to bring you in, but if you have a great experience, you're going to come back and be a loyal guest in our facilities. If you don't have that, you're constantly fighting with marketing dollars to keep bringing new people in.

I'd rather not spend the money on marketing, although we did really well with marketing. Return on ad spend in our industry is about $5 to $10 in ticket sales for every dollar spent. We were able to get $25 to $65 back in ticket sales for every dollar spent. It's really about getting people to say, "Hey, this is a place I want to go." But I couldn't do that, I couldn't sell tickets online, if my experience wasn't good. And my experience was horrible when we took over, because I inherited a bankrupt company. I talked about the manager and the team members playing cards at a table in one of the locations. It's stuck in my head. We can't do these things. We have to be responsive.

Part of that comes back to when I was working at Disney for six and a half years. You get indoctrinated with guest service. And I'll boil it down to this: you've got to forget your troubles before you go out on stage. At Disney, you go behind the wall, come out of the tunnel, whatever it is, and you forget your world. You had a flat tire, you were fighting with your spouse, your spouse got fired, someone in your family died. Yes, those are all emotions and issues inside you, but you're physically going out there and acting, so the guests get the best experience possible. Because the guests don't care. They're actually escaping their world. That's why they're there with you. They can put their money anywhere they want, but they chose to come see you. So why aren't you giving them a good experience?

So you have to segregate that. When you go out on stage, all your troubles are out, and the guests are there to experience something good. If the metaphor is that you're acting, then that's what you are. You're acting when you go on stage with guests. Behind the walls, you can talk about whatever, but don't let it get in front of the guests. And some of the simple things that come from Disney: you don't want delivered packages sitting out everywhere. You don't want tools out everywhere. You want to make sure the place looks pristine.

I'm coming in to give you my money, and I hope I walk out with great memories with my family. If I don't have great memories, guess what? I'm not coming back. What happens in our industry is that operators put more money in to try to get new people in the door. But how many new people can physically come in? Eventually you can't get any more, if you have a horrible reputation online. So instead of worrying about the attendance, how about I worry about the experience that will bring the attendance?

Bruce EckfeldtHow big is the market? You mentioned that when you took it over there were 16 properties, and you kept eight. What criteria did you use to decide which ones had potential and which ones you just needed to cut bait on?

Tim MurphyThere were two that were money pits right off the bat. They were amusement parks the previous company had bought during its four-year regime and brought together. I went and looked at those parks in the snow, north of Indianapolis in February, and in Buffalo in a snowstorm in February. And I said, this is just too hard. The upkeep the rest of the year: it freezes, things break, you've got a water park, pipes are busting. It happens. Why do we want those? So there's that.

Then there were two in the Dallas and Houston markets. I really wanted to be in Dallas and Houston, but it was the location they were in. They'd been there for 20, 30 years. At one place, there was a homeless encampment all around it, and you're trying to bring families in there. At the other, when you drove out, you were in the adult entertainment area of the city. I'm not going to bring anybody in there. You're not going to do corporate events or team-building events or parties there. So unfortunately those had to close.

There were four others in Southern California that I really wanted, but we couldn't make a deal with the landlord. We calculated back rent of $168,000. They said that to stay, with all the things the previous company hadn't done, it would be $14.3 million. We said forget that, we're closing those locations.

So I look at the numbers, and then I ask, can I market this facility? What are the demographics like? Could I bring people to this place? Does this make sense? The cities of Dallas and Houston are great, but both of those locations were horrible. The other four, where we just couldn't make a deal, I could have made work. Two of those locations probably wouldn't have been the best, but the other two were fantastic, in the San Diego market and the LA market.

But the bottom line is, I first look at the numbers. What's sucking wind? If I could stop the bleeding and fix those issues, could this end up being a better facility? And the answer was no, I couldn't. If I put more money into them, it really wasn't going to improve them. I'd probably have had to put millions and millions into those amusement parks that were part of the portfolio. And I can't change demographics, so that just strikes it off the list.

Then I looked at the rest and said, we're in some good suburban markets, city markets, farm town markets, and tourist areas. Let's focus on those, because we can create a great experience in those. That's ultimately what led to how we closed the others down. Numbers always talk to me, and trends. How much money were they pouring into these amusement parks? How much more money were they pouring into marketing to try to get people to go to these bad locations? Let's not do that again. Let's go after what we can control.

Bruce EckfeldtThe other thing I want to ask about is the customers. You talked about really focusing on which customers you want, from an experience and marketing point of view, the whole Target shopper versus Walmart shopper thing. How did you do that analysis? I find this a lot with companies. I'll go in and look at their customer or client list, and we'll start looking at who's actually profitable, who's easy to work with, who's actually helping promote them and get other business. And I generally find the bottom 10% of customers actually cost them money, from a cost of service versus what they're actually making. What's the process by which you look at the customer base and decide where you want to focus?

Tim MurphyOne of our core values was profitable sales growth. That meant we needed to be profitable on everyone and grow sales. So how do you do both? I'm working for private equity, and that's what they want at the end of the day. But you have to get the team to understand it.

So let's look at our pricing structure. We had single attractions: you could do miniature golf or go-karts or laser tag or whatever. They also had what was called a season pass, which ended up being an annual pass. So for $39.99 for the entire year, people are going to come in and run my go-karts every day, every week, whatever they're doing. We had gas go-karts. Do you know how much gas goes into those things, let alone the tires and the oil and everything else? Am I really bringing anyone in?

Six Flags is having one of these issues right now, because the model has changed and they don't know what's happened. They were down about 1.7 million in total attendance this year across all their parks. They're going to have to rethink this whole process. Dynamic pricing is one of those areas that might alleviate some of that pressure, but they've got many more problems.

When I looked at it, I'm thinking, I've got people paying $39.99 for an entire year, and they're not buying anything else. That's my discounter. Those are the people I'm going to fire. You were talking about the bottom 10%. That was more like 60% or 70% of my total revenue coming through. I've got to get out of that business, because otherwise we're just going to dig the hole deeper.

I honored the season passes when I took over, and of course I had the pandemic to deal with, because we opened and closed four times. I extended them for a long period. But anyone new coming in didn't get that. You're going to pay the premium price. I went to half-day passes and full-day passes. We eventually went to full-day passes with three different tiers, where you could get some arcade credits or food credits. The bottom line is I wanted that guest to pay for our bills on that day. What would it take to pay for the labor?

Because under the old scenario, it was like a Ponzi scheme. "I need more people buying season passes so I can pay our labor today." And tomorrow even harder, and the next day, and the next day. When I looked back over the numbers before we ever took over these parks, while I was consulting for them, I saw that when they put these season passes in, total sales went up and individual passes went down. That was good the first year. That was the hit. The next year it leveled off, and single passes were down through the floor. No one was buying those. You weren't getting new guests coming in.

My predecessor came from big theme parks. Six Flags just happened to be where he came from. That's what they had done there. But that's not how you run FECs, family entertainment centers. You've got to know your market and who's coming in. An FEC draws from a 15- to 20-minute radius of your home. That's where you go for different entertainment, food and beverage, a bar, what have you.

So I looked at years three and four, and they were not selling season passes. And what did they do during that entire time? They stopped spending on the parks. They spent no money on repairs and maintenance. They didn't fix the attractions. What does that do? It gives you horrible reviews. The reviews were going through the floor. They did different little events for Halloween and Christmas, but it didn't really do anything, because it was something added for the season pass holders. When you're going through the floor and you don't have attendance coming in, when do you say stop? I've got to be profitable on these guests.

So we changed our pricing. I honored the passes until the following spring, and we got through the whole pandemic, and then I started charging what it actually takes for someone to come in. We varied it. We had $39.99 or $29.99 on certain days, and on other days we were up to $59.99. We had different packages for people.

And we taught our guests with all the changes we made. We remodeled all the bathrooms, we fixed all the carpet and tiles, we put money into these parks to make them feel fresh. A coat of paint will do wonders for a building. "Wow, it looks new." The lights are fixed. "Wow, that's pretty amazing. It looks like they've really done something." Had we really? Not hugely, but we made it better for the guests. And now you're starting to make that asset more valuable. This is something to come back to. You start to see the reviews tick up.

We were not perfect from day one. There were a lot of things to fix along the way to get those reviews to 4.7 to 4.9. But the overall goal from day one was more online sales and a better experience. And in the back of my mind, I've got to get the EBITDA numbers up so there's value in this company. We're going from a worthless bankrupt company to something with value that Cerberus can actually sell. That was my job. That's what I was there for.

I had to keep thinking through each of the steps. Each time we could add more EBITDA to the bottom line, more cash flow that we could pull through the parks. I can save on labor, I can save on costs, I can charge a little more. All these little combinations add more value. We did an $18 million swing in a two-year period. We went from negative $10 million to positive $8 million in '21. It shows you can do it, and it didn't happen overnight. That's two years right there. But now we're showing the eventual buyer that there's value in this business that they hadn't been thinking about.

We thought about every line item every time we considered a change. What's the value it's ultimately going to bring us? I had to teach the team this, because in their minds it was, "Well, we need to do this." Yes, safety is always number one. Always do those things. But when we do these other things, does it add more value to the top line as well as the bottom line? Does it flow through more significantly than what we were doing before with pricing and food? What can we do in those areas?

That got the creative side going. I would look at a piece of concrete with four picnic tables on it and ask, could we make something better out of this area? We called it Boomers Backyard. Edison lights, grass carpets, comfortable chairs, fire pits, TVs on the wall to watch games. People hung out. And guess what? When they hung out, they stayed longer. If they stayed longer, they spent more. It's these little things where you think, this isn't so hard.

If you've gone to a water park, you might get a cabana. So I looked at another park that had concrete and said, what if we put in cabana-type areas, VIP areas, and people can rent the space? Guess what? Sold out every weekend in Irvine, California. Sold out in Boca. It did so well that we tripled the size in Boca. People want their space. It's identifying trends in what people want to do and getting in front of them. I don't know of any other FEC that put in a cabana or VIP area. Maybe some are doing it now. But it was pure profit, outside of the cost of putting up the nice little lounge area with lounge chairs, a TV, a refrigerator, and a place to plug in your phone. It's just a cool little spot, and it created more revenue. As long as we maintain it, it's paid for.

It's little things like that I just don't think people look at. What can I do with this asset? What can I do with this piece of concrete? Could I make something out of it? I would always pay attention when I walked in, and I tried to teach my team this too: be the guest. What does the guest look at? Where do they walk? What do they see? What are they doing? Why are they there? Most people don't take the time to do that.

I would have team meetings and say, "All right, do what I do. Let's go to the parking lot and walk in. What does a guest see coming in? Does the landscaping look good? Is it clean? Is the trash picked up? Are there rips in the banners outside? Is a flag ripped on top of the building?" These are things guests see. "By the way, the top of the building isn't completely painted. Even though we repainted the building, I can still see the old color up there. Guests see that too." Those things need to be addressed.

I don't know how many times, after I moved back to Orlando from Irvine, I'd fly in and say, "It's still not painted up there, guys. Let's get this building painted." That's what I see. I drive around the parking lot and look at it, because that's what the guest sees. So walk through it. What is the guest's experience? Are they being educated? "This attraction's down today, just want to let you know, but all the other attractions are open." We put in call boxes as part of some labor savings. You press the call box, it comes to someone's ear, and we get someone over to handle the ride for you, on the Tilt-A-Whirl or the teacups and so forth. If you educate the guests and make it look pleasing, everything else follows from there.

When I first got there, I took the team out to the park and said, "I can't see the park. I see an attraction over there, but I can't see the rest of it." The trees and bushes were so big. Cut this stuff down. The guests need to see it. You need to see it too, to know what the guests are doing, but the guests need to see that everyone is having a good time.

Here's an analogy I go back to from when I worked at Applebee's. I worked for the former chairman and CEO of Applebee's and picked his brain for four years. One of the things he did: if you go into an Applebee's, he sunk the bar lower. There's a reason behind that. There are usually high-tops around the bar. Why did he do it? So that people dining have the same eye level as everyone in the bar. If the people in the bar are having a good time, watching games and drinking, then the diners are apt to have a better time too. The sight line across the restaurant is the same as the sight line in the bar.

Bruce EckfeldtThat's fascinating.

Tim MurphyIf I'm out on the freeway, on the 405, or the 101 that we had in Santa Maria, and I can't see the park: clear some trees out of here. Trim them up. If you're a tree hugger, I'm okay with that, but just clean it up. We had hedges that were 20 feet high. "Why do we have these? Cut them down. If you take care of them, they'll still grow."

It's these little things that make a better experience for the guests, and at the end of the day bring more people to you. They see other people having a good time, and they think, "I can picture myself there having a good time." That carries into the marketing. What do you put on the website? Are people immersed in what they're going to experience when they get there? Can they see all the fun stuff that's happening, the food, the arcade, everything else? Can they see themselves there? If they can see themselves there, then they will be there. Then you'll have groups and parties and group events and team building.

All these little things are aspects of it, but always be the guest. Even if you have a service-based business, what's the service you'd want to enjoy when someone comes to your building, your home, wherever? Are you delivering on that, or are you just like any other service business out there? What is the guest experiencing? That's what you've got to be, and then you ask, what steps do we have to take to do the things they would really want?

Bruce EckfeldtI want to touch on your private equity experience, because I think private equity looks at businesses very differently than owners do. From your point of view, what do owners typically not think about or not understand about private equity, in terms of what they look for when they come in and look at a business, either in terms of valuation or what I call buyability, what makes a company viable from a private equity point of view? What should owners really know about this?

Tim MurphyOne thing I've seen a lot, especially with private equity, is that a lot of owners like to run a lot of things through their business. That's going to get stripped out. These guys are smart. You can't hide this stuff from them. Once they've stripped it out and see the true earnings of the business, is it viable?

Every private equity firm is a little different as far as their threshold. Cerberus is huge, Carlyle is huge, but I've worked with others that are very small. They're going to look at the EBITDA number and ask whether they can reproduce it. Can they cookie-cutter this business? In my case, I had eight separate parks. You couldn't cookie-cutter them.

What I was working on was a plan to franchise our family entertainment centers. For instance, our Boca Raton park did $8 million on the top line, throwing off 45 to 48 cents of every dollar in EBITDA at that location. It could be reproduced. Was it reproduced? No, because we took over these existing assets. But I said we could franchise this business and reproduce that.

Private equity says, "I've got money, but I'd like to see this reproduced. I've got more money I can put into this business to really expand it." It could be a partner coming in while you're still running the business. But if you don't have an executable growth mechanism, it's not going to be as interesting to them. It'll be more interesting to single-family offices or VCs who want to come in and grow it. Private equity is looking for how to reproduce what you do on a continuous basis.

A lot of times private equity goes into, in our case, family entertainment, thinking they can reproduce it, and their idea of reproducing is to acquire. But you can't get the same type of results, because every place is a little different. With a restaurant, they can see execution. There are certain prototypes. Applebee's is one I talked about already, and fast food, McDonald's, Chick-fil-A, whatever. It's a standard model, and they know you're going to execute on the EBITDA at this location. It throws off X, we can reproduce that, we can put money behind it and push it out.

If you have a business that can't really grow from that point of view, you'll get value. But I think you'll get more value if you can show the growth mechanisms associated with it, and they will see that with you. They'll be a partner and say, "I see that. Let's experiment. Let's put some money into this first, see how it goes, and execute based off of it."

Back to Boomers. I saw my results, and my boss said to me, "You did so well with these eight locations. Go find more around the country." I kicked the tires on 50 family entertainment centers around the US and put out several LOIs. What came back was, "No, you're not going to spend our money. Find another way of doing this." I had a $25 million credit line, and I couldn't use it.

So I said to them, "Look, I come from franchising restaurants, as well as Rebounderz trampoline parks. We could franchise Boomers. It's not a hard concept. We can size it down, but we need to give potential franchisees a prototype they can come into. They're not just going to take some old brand and slap a Boomers logo on it. We need to design something for them that can execute X amount." If I'm doing 45% to 48% in Boca Raton, with 30% weather, could my margins go higher? My answer is I think so. Labor will be better, utilities will be better, other operating expenses will be better. I might get to 50% of every dollar taken in.

So what can I do for franchisees so this can be replicated? From a PE point of view, they're asking: you've got a certain amount of EBITDA. Can you execute this again at multiple locations, or do you have to keep buying individual ones that come with potential liabilities, lawsuits, issues? They want it simple, so they can execute and grow it and flip it to someone else three to five years down the road.

So from a PE point of view, if the locations aren't similar, I don't think they completely get it. That doesn't mean PE doesn't get into it. They think, "We could do a roll-up strategy by just buying all these other ones." I know a PE firm that's gotten into this. They have seven different brands in family entertainment. They're doing pretty well with the one they're building right now, but the rest of them are sucking wind. They're down 30%. So PE has gotten into this and found that it isn't working as just a roll-up strategy, because the locations are all different.

But if you can create some synergy, a prototype, a design that's similar and can be executed in a cookie-cutter approach... Applebee's is the example. The former chairman I worked with built Applebee's from 52 units, buying it from W. R. Grace and moving it to Kansas City. Today it's in Southern California. But he went from 52 units and retired with over 1,300. He did something right in how to cookie-cutter it, and that's what a PE firm is looking for when they come in to expand. If you just think you're going to sell it and they'll say, "Now it's your baby, you figure it out," you're not going to figure it out. They're very smart people, but if you don't have a growth plan for how to make it work, I don't think they're coming into it.

Bruce EckfeldtGreat advice. We're going to hit time here. Tim, this has been a pleasure. If people want to find out more about you and the work you're doing, what's the best way to get that?

Tim MurphyI think the best way is to reach out to me. My email is tim@timothypmurphy.com. You can look me up on LinkedIn, and you're more than welcome to connect with me there. I also have a website, timmurphyceo.com. So it's very simple to get hold of me. And I'm actually working on something pretty good. We were just talking about PE. I have something that will be a cookie-cutter approach in that industry.

Bruce EckfeldtAwesome. I look forward to hearing about that. I'll make sure that contact information is in the show notes. Tim, thank you so much for taking the time today.

Tim MurphyHey, Bruce, it's been a pleasure. Thanks.